How Will Hercules Offshore Do in 2012?

Now is a good time to check on how the stocks in your portfolio might shape up next year. A good knowledge of the opportunities and the challenges ahead for companies can help you make better investing decisions. Let's take a look at what the next 12 months hold for Hercules Offshore (NAS: HERO) .

With the Gulf of Mexico gradually opening up this year following a moratorium on drilling after last year's oil spill, this offshore driller has been breathing easier. However, things haven't been going great guns this year. The company has so far failed to increase operating profits this year.

From a total of 40 jack-up rigs, 22 are currently cold stacked (i.e., completely shut down), 16 are active, and two are in the shipyard for repairs. Also, most of the current contracts in the Gulf are due to expire in the first quarter of 2012. The domestic offshore segment has been less than impressive. With more than half the total number of rigs in cold storage, I'd want to question management's wisdom in investing in these many rigs on the domestic front.

There's hope
But there's still hope. The question of finding ultra-deep reserves in the Gulf has yet to be answered. Energy XXI (NAS: EXXI) , currently a customer, is teaming up with McMoRan Exploration (NYS: MMR) in the quest to discover these reserves. Again, the first quarter of 2012 is critical here. If successful, then Hercules has the right equipment -- rigs to drill up to 25,000 feet below the seabed in a water depth of 350 feet.

With established players such as Chevron (NYS: CVX) , Apache (NYS: APA) , and Stone Energy (NYS: SGY) currently being the primary customers, there's a good chance that other upstream companies might sign up for the rigs if a major discovery is made. I'm keeping my fingers crossed.

In terms of international operations, Saudi Aramco is holding a couple of rigs for the next three years. The rest of the rigs are all booked for the next three to six months.

Foolish bottom line
The stock should go a long way if the Gulf of Mexico delivers. But right now, that's a little speculative. We at The Motley Fool will help you stay up to speed on the top news and analysis on Hercules Offshore. You can start by adding it to your watchlist.

At the time thisarticle was published Fool contributor Isac Simon does not own shares of any of the companies mentioned in this article. Motley Fool newsletter services have recommended buying shares of Chevron. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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